In this article the author discusses the possibility of the use of Blockchain (Smart contracts) in the Arbitration Proceedings.
Background
Blockchain technology basically refers to to system where there is no centralized control over the transaction. It stores information in decentralized blocks which can only be accessed by the person having the encryption key to the block. Each such block thereon goes to form a chain of such secured decentralized blocks.
Blockchain technology is a decentralized public ledger, which records information in a way which makes it difficult to track, modify or hack.
Since blocks in the blockchain are difficult to hack, modify or track, it can be used in places where confidentiality is of utmost importance. Let us now understand whether confidentiality of arbitration proceedings can be protected through the use of blockchain technology.
Arbitration ~ Confidentiality
This article elucidates upon the possibility of use of Blockchain in Arbitration proceeding.
Will it be advantageous or disadvantageous?
Does the legal framework in India support the implementation of blockchain technology in arbitration proceedings?
Lets know about it here.
Introduction
Blockchain is often correlated with Crypto assets. While this is true that, Crypto transaction take place with the help of Blockchain technology; however, it is just a fraction of the usability of Blockchain Technology.
There are various uses of Blockchain technology which are given as below:
Blockchain ~ Privacy
One of the major qualities of Arbitration is quick resolution and maintaining confidentiality!
Hence, it is apparent that there is a huge possibility of harmonious interplay of Blockchain and Arbitration.
Well. Let’s clear the air. Let’s understand, what Smart Contracts are and why are we talking about this?
What is Smart Contract?
Smart Contract is just like any normal Contract. The only difference is that, the Smart Contracts are completely digital.
In fact Smart Contracts is actually a tiny computer program; which is stored inside of a Blockchain. Let’s take an example to understand how smart contracts work.
Have you heard of Kickstarter?
Kickstarter is one of the largest ‘crowdfunding platform’. Product team can go to Kickstarter. Create a project. Select a Funding Goal and start collecting money from others who believes in their idea.
Kickstarter basically is a third party entity, which sits in between Product team and the supporters. This means both of them need to trust Kickstarter to handle their money correctly. Make sense. Right?
If a project gets successfully funded, product team expects Kickstarter to give them their money; and supporters want their money to go to project if it was funded or a refund, if it didn’t work.
Both the product team and supporters have to trust the Kickstarter!
But with Smart Contracts; You do not require any 3rd party entity like Kickstarter and forcibly subjected to have trust on such entity!
Let’s understand smart contract
We can program a smart contract, so that it can hold all received funds; until its certain goal is reached. The supporter of the project can now transfer their money to the smart contract.
The contract automatically passes the money to the creator of the project; upon the completion of funds. And if the project fails to meet the goal, the money automatically goes back to the supporter. Considering, that smart contract remains on the blockchain; everything is completely distributed. As in this technique no one is having control over this money.
Pretty awesome. Right?
But wait a second…
Why shall we trust Smart Contracts?
Well, because smart contracts are stored on a blockchain; they inherit some interesting properties.
They are immutable and distributed.
Being immutable means that once a smart contract is created it can never be changed again. So no one can go behind your back and tamper with the code of your contract.
Being distributed means that the output of your contact is validated by everyone in the network. So a single person cannot force the contract to release the funds, because other people on the network will spot the attempt and mark it as invalid.
Tampering with smart contracts become almost impossible. Smart contracts can be applied to many different things and not just crowdfunding.
Where can we use smart contract?
Heard of Ethereum?
It was specifically created and designed to support smart contracts. Every time you buy an Ethereum, you involve yourself in the smart contract.
Why are we talking about Smart Contracts?
Well. This article seeks to explore the possibility of using Blockchain technology in the field of arbitration.
Smart Contracts uses the Blockchain technology. Therefore, its imperative to investigate the scope of Smart Contracts in the arbitration proceedings.
Biggest Concern in an Arbitration and Smart Contracts
Have you ever used Indiankanoon, SCCOnline, Manupatra or Legitquest?
Yeah right? You have heard of them, they have a vast resources of Judgments and Court orders.
Court judgments are freely available. What happened with the party? Who were the party?
You can get these info. with a click of a mouse; unless, parties specially apply for removal of their name from the record. Even if they do, sometimes, it gets too late.
Now how many online resources do you know, where you could find Arbitration Awards this freely?
Maybe you could refer Jus Mundi or Wolterskluwer. However, there are a very limited arbitration award which goes public, most of them are kept confidential.
Parties share sensitive information with the tribunal, exchange confidential documents, etc.
What if such information/document is hacked? This is not a ‘never have been done before’ circumstance.
In July 2015, the website of the Permanent Court of Arbitration in the Hague was hacked during a hearing of a sensitive maritime border dispute between China and the Philippines.
Considering, we are opting for virtual arbitration; such incident could create a trust issue in the mind of the parties.
By introducing smart contracts, which will ensure that the documents once put on the system; will be subjected to a defined pathway. Maybe a permanent deletion after sometime. It will also protect such data from unwarranted breach in the cyber security.
Will smartcontracts be enforceable in India?
Section 7(4)(b) of the Arbitration and Conciliation Act, 1996 validates an Arbitration Agreement which was entered into through the communication made via an electronic means. Other laws validates it as well. Hence, if in future Smart contracts makes it to the Arbitration Proceedings; it will be legally binding and viable.
Conclusion
Blockchain is a new concept. Its decentralized nature, makes it less susceptible to an error, fraud, unwarranted modifications, etc. Smart Contracts works within the Blockchain environment. It ensures, client’s confidentiality; and prevents any possibility of unwarranted external influences. In short, smart contracts are safe and preserve confidentiality. An ideal goal of arbitration is to ensure absolute confidentiality. Smart contracts, ensures the same. Therefore, there is a great scope of Blockchain technology in the Arbitration Proceeding. It will ensure, that the confidential information are preserve and party autonomy is upheld.
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